Skyrocketing Internet traffic will fuel demand for switches
and routers in service providers' networks, according to new numbers from
market research firm Ovum.

In a report released March 19, revenues in the global service
provider switching and routing market will jump from $13.3 billion in 2010 to
$20.5 billion by 2017, thanks in large part to Internet traffic that is being
driven by the growing popularity of connected mobile devices, demand for such
bandwidth-hogging consumer applications like video, and rising subscriber
penetration in fixed and mobile broadband networks.

And its going to cost carriers if they want to keep their
customers, according to David Krozier, principal analyst of network
infrastructure at Ovum.

Carriers will need to invest in growing their IP
infrastructure or risk losing subscribers, Krozier said in a statement. In
developing nations, carriers are building out their 3G wireless networks, while
developed nations are investing in LTE [Long-Term Evolution] to accommodate
mobile bandwidth demand.

Service providers will be pressured by the bandwidth demand
in the coming years, according to industry observers. Analysts at IDC in a March
14 report said broadband
traffic over fixed networks will jump 50 percent every year over the next
three years, while traffic over mobile networks could essentially double every
year into 2015.

They pointed to so-called power users, who are eating up a
disproportionate share of the bandwidth.

"The enormous growth in end-user demand for both fixed
and mobile broadband services is staggering," Matt Davis, director of
consumer and SMB telecom services at IDC, said in a statement when the report
was released. "Despite enormous growth projected in IDC's forecast, it is
difficult to overestimate this phenomenon. Fixed and mobile operators will have
to deal with a new reality that will tax network resources to the limitand
perhaps past the limit."

IDC analysts are predicting that global end-user demand for
data will drive wired and mobile broadband traffic from the 9,665 petabytes per
month in 2010 to 116,539 petabytes a month in 2015.

They also saw similar trends to those mentioned by
Ovumconsumer applications like video streaming and Web browsing driving the
demand, and that as broadband capacity increases, so does usage.

Other industry organizations also are forecasting rising
levels of Internet traffic. Networking giant Cisco Systems last year said that global
Internet traffic will reach 966 exabytes per year by 2015, and that the
growth alone between 2014 and 2015about 200 exabyteswould be more than the
total amount of Internet traffic seen globally in 2010.

They also noted that by 2015, there will be 15 billion
network-connected devicesincluding PCs, smartphones, tablets and
appliancesworldwide.

Ovum analysts said that for now, North America was the
largest region last year for switches and routers for the service provider
market, followed closely by the Asia-Pacific region, which contains two of the
worlds top three economies in China and Japan. However, with 9.7 percent
growth in the Asia-Pacific region expected for 2012, compared with 4 percent
growth in North America, the Asia-Pacific this year could become the largest
market for service provider switches and routers.